Here’s a rewritten and original version of the information you provided about credit card interest, charges, and insurance. The meaning and structure have been preserved, but the wording has been changed to ensure clarity and originality:
Credit Card Interest, Charges, and Insurance Explained
This guide outlines the types of fees and charges you may face when using a credit card, such as interest rates, overseas transaction fees, late payment penalties, and balance transfer costs. It also includes helpful tips on credit card insurance.
Charges by Retailers
Since 13 January 2018, businesses in the UK cannot add extra charges for payments made with debit or credit cards. If you’re wrongly charged, complain directly to the seller and request a refund. If the issue isn’t resolved, contact the Consumer Helpline, which can also escalate the matter to Trading Standards.
Exceptions:
- Fees may still apply if the seller or your bank is outside the European Economic Area (EEA).
- Business or corporate cards may still incur additional fees.
Interest on Purchases
If you pay off your full balance by the due date, you won’t be charged interest on your purchases. However, interest may apply immediately on cash withdrawals.
If your credit card provider decides to raise your interest rate, they must give you 60 days’ notice. During this time, you can reject the increase and clear your balance under the old rate.
If you only pay part of your balance:
- Interest will be charged on the remaining amount.
- The highest interest rate debt will be paid off first.
- Your credit agreement will detail how and when interest is applied.
Only making minimum payments may lead to long-term debt and higher overall costs. If this is a regular issue, your credit card company may contact you to warn you of the risks.
Use tools like the Which? repayment calculator to explore how paying more each month can reduce your repayment term and overall cost.
Using Your Credit Card for Cash
Withdrawing cash using your credit card is costly:
- The interest rate for cash advances is typically higher than for purchases.
- Interest is charged immediately, with no grace period.
- You’ll also pay a cash handling fee—often around 2% of the withdrawn amount.
Spending Abroad
When using your credit card overseas:
- Most providers charge a foreign transaction fee (usually 2–3%).
- Cash withdrawals abroad may trigger both cash advance and foreign exchange fees.
- The exchange rate will also impact the final cost.
Check with your provider before traveling. Some may ask you to notify them to avoid your card being blocked due to suspicious activity abroad.
Credit Card Cheques
Providers are no longer allowed to send credit card cheques unless you’ve specifically asked for them.
If you use a credit card cheque:
- The transaction amount is added to your credit card balance.
- These cheques often incur higher interest rates than standard purchases.
- Dispose of unused cheques securely—shred them to prevent fraud.
Balance Transfers
A balance transfer involves moving debt from one credit card to another, often to benefit from a lower interest rate.
- Many deals offer 0% interest for a limited time.
- Be cautious: new purchases on the new card may be charged at a different (higher) rate.
- Transfers usually incur a handling fee, typically around 2% of the transferred amount.
Use a balance transfer calculator (e.g., on the Which? website) to see potential savings.
Missed or Late Payments
Your credit card statement tells you:
- How much to pay
- When the payment is due
Payments can take several days to process. Late payments may result in:
- Default charges
- Late fees
- Additional interest on the missed amount and any fees added
Setting up a direct debit for at least the minimum payment can help avoid these issues. You can always make additional payments when you’re able.
If you’re charged more than £12 for missing a payment, the fee may be unfair. You may be able to challenge it and request a refund. The Money Saving Expert website offers a guide on reclaiming unfair charges.
Credit Card Insurance
When applying for a credit card, you might be offered insurance products. These usually fall into two categories:
1. Payment Protection Insurance (PPI)
- Helps cover your credit card payments if you lose your job, become ill, or die.
- Always check the terms carefully, especially if you’re self-employed, work part-time, or have existing health conditions.
- Payouts may be limited in value or duration.
2. Card Protection Insurance
- Covers you if your card is lost or stolen.
- Regardless of coverage, always report lost or stolen cards to your provider immediately.
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